Well, it doesn't hurt to test the waters, does it? Most know it's a no brainer in not spending billions on a new FAB when fabs worldwide are in post consolidation phase now. If the global leader, TSMC itself was finding it difficult in these lean times to get its order book full then it's better to concentrate efforts on it's domestic electronics industry.

Sometime in the middle of the last decade, when Y.S. Reddy was the Chief Minister of A.P State, we heard about the Fab City near Hyderabad, A.P. But that idea never materialized.
An industry expert once gave a very good explanation to me... its not just the capital cost or the subsidized land or tax benefits that are preventing companies from setting up a fab in India... but the shortage of continuous power/water/etc., supply, and the services that are need to sustain a fab.
From a zoomed-out perspective... China is pacing itself to be the next mfg giant with huge investments in energy technologies, the UAE is looking towards Solar/Semiconductor technologies (read as ATIC/GF).. If India were to compete in this fast changing geo-political stage, it has to focus on these technological trends and place itself strategically.
I wonder if the Indian Govt. is thinking realistically when it made this statement in the article "Local chip manufacturing will not only offset those imports but, the government believes, bolster an ecosystem from chips through software to systems. "
If anyone knows better, could you please tell me in which country does such an ecosystem exists? First off, would it be advantageous to have one? With Taiwan (and of course China) in the backyard, a country whose semicon mfg has kept up with the Moore's law and is driving down the costs with its scale, is it practical for India to think that it can create an affordable semiconductor eco-system? May be the Indian Govt is thinking strategically and placing the fab production in such a way that it meets the cost and market demand. But I think it has falsely cried "wolf" too many times already.
@ HVREDDY: Could you pls comment on one other time when this happened?

Well it is a exercise in futility. The Govt will announce a fab with a willing participant, divi up the land near the announced fab, sell it investors for exorbitant money and then watch the fab disappear. This will be the third time... Another major corruption..... Guess the current govt needs money before next election cycle... New gimmick...